FSM Development Bank v Gilmete [2017] FMSC 8; 21 FSM R. 159 (Pon. 2017) (27 February 2017)

FSM SUPREME COURT TRIAL DIVISION

CIVIL ACTION NO. 2014-013

FSM DEVELOPMENT BANK, )
)
Plaintiff/Counter-Defendant, )
)
vs. )
)
QUIRINO GILMETE, ETWIHKA GILMETE, and )
GILLIARD GILMETE, )
)
Defendant/Counterclaimants. )
)
QUIRINO GILMETE, ETWIHKA GILMETE, and )
GILLIARD GILMETE, )
)
Third-Party Plaintiffs, )
)
vs. )
)
APSCO, INC., )
)
Third-Party Defendant. )
)
APSCO, a partnership of A&P ROCK )
PRODUCTS, INC. and SAITO GUMI, LTD., and )
APSCO CONSTRUCTION CO., a partnership, )
)
Third-Party Counterclaimants, )
)
vs. )
)
QUIRINO GILMETE and FSM DEVELOPMENT )
BANK, )
)
Third-Party Counterdefendants. )
_____________________________________________ )

ORDER DISPOSING OF SUMMARY JUDGMENT MOTIONS

Larry Wentworth
Associate Justice

Hearing: October 19, 2016
Decided: February 27, 2017

APPEARANCES:

For the Plaintiff: Nora E. Sigrah, Esq.
P.O. Box M
Kolonia, Pohnpei FM 96941

For the Defendants: Salomon M. Saimon, Esq.
Directing Attorney
Micronesian Legal Services Corporation
P.O. Box 129
Kolonia, Pohnpei FM 96941

For the Third-Party Defendant: Stephen V. Finnen, Esq.
(& 3d-Party Counterclaimants) P.O. Box 1450
Kolonia, Pohnpei FM 96941

* * * *

HEADNOTES

Civil Procedure Summary Judgment Grounds
A court, viewing the facts and inferences drawn therefrom in the light most favorable to the nonmoving party, must grant summary judgment only if the pleadings, depositions, answers to interrogatories, and admissions on file, together with any affidavits, show that there is no genuine issue about any material fact and that the moving party is entitled to a judgment as a matter of law. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 168-69 (Pon. 2017).

Contracts
A loan application is not a contract. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 169 (Pon. 2017).

Banks and Banking; Contracts Formation
A loan application is an invitation by the applicant for the bank to make an offer to lend the applicant money. The bank may then decline to make an offer (deny the application) or it may make an offer (propose to lend money on certain terms), which the loan applicant may then accept (forming a contract) or reject. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 169 (Pon. 2017).

Contracts Formation
A person, who did not sign the loan application but who accepted the bank’s loan offer when he agreed to the offer by signing the promissory note and the mortgage, is a party to the promissory note and the mortgage contracts. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 169 (Pon. 2017).

Civil Procedure Summary Judgment Procedure

When a party moves for summary judgment, that party must also overcome all of the adverse parties’ counterclaims in order to be entitled to summary judgment. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 169 (Pon. 2017).

Civil Procedure Dismissal; Civil Procedure Summary Judgment Grounds
A party cannot revive a previously dismissed counterclaim by moving for summary judgment on that counterclaim. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 170 (Pon. 2017).

Banks and Banking; Torts Fraud
"Predatory lending" is a term generally used to characterize a range of abusive and aggressive lending practices, including deception or fraud, charging excessive fees or interest rates, making loans without regard to a borrower’s ability to repay, or refinancing loans repeatedly over a short period of time to incur additional fees without any economic gain to the borrower. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 170 (Pon. 2017).

Banks and Banking; Torts
The predatory lending tort is usually either created by statute or relies on an existing statute as a basis for the cause of action. Neither Pohnpei nor the FSM national government has enacted a statute that could make predatory lending a cause of action. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 170 (Pon. 2017).

Federalism National/State Power; Torts Negligence
While tort law, especially a common law tort like negligence, is primarily a state responsibility, the national government may create tort law when legislating in an area that the Constitution has expressly delegated to Congress the power to legislate. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 170 n.4 (Pon. 2017).

Banks and Banking; Federalism National/State Power
The regulation of banking and of commercial paper are powers expressly delegated to the national government. "Commercial paper" is any instrument, other than cash, for the payment of money and is generally viewed as synonymous with negotiable paper or bills. Promissory notes are commercial paper. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 170 n.4 (Pon. 2017).

Torts Negligence
To properly state a negligence claim, a plaintiff must show that the defendant owed the plaintiff a duty of reasonable care, that the defendant breached that duty, that damage resulted, and that that breach of duty was the proximate cause of the damage. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 170 (Pon. 2017).

Torts Negligence
If negligent lending were a cause of action, the borrowers would have to show that the bank owed them a duty of reasonable care to not lend them any money if the bank knew, or should have known, that there was not a reasonable likelihood that the borrowers could repay the loan in conformity with the loan’s repayment terms. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 171 (Pon. 2017).

Torts Duty of Care
When the bank showed sufficient diligence in investigating the borrowers’ financial condition and the borrowers’ ability to repay the loan they sought, if the bank had a duty to the borrowers to investigate their ability to pay and to not lend them money if they did not have the ability to repay, it did not breach that duty. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 171 (Pon. 2017).

Civil Procedure Summary Judgment Grounds

When the counterclaimants cannot prevail on an essential element of the two torts (negligent lending and predatory lending) that they allege that the bank committed, those counterclaims must, as a matter of law, fail. This is because a complete failure of proof concerning one essential element of a party’s claim necessarily renders all other facts immaterial, leaving no genuine issue about any material fact. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 171 (Pon. 2017).

Torts; Torts Negligence
When the defendants cannot prove an essential element of their negligent lending and predatory lending counterclaims, the court does not need to, and the court will not now, decide whether either of those torts should be recognized as actionable in the FSM. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 171 (Pon. 2017).

Civil Procedure Summary Judgment Procedure
Since the burden of a plaintiff moving for summary judgment extends to affirmative defenses as well as to the plaintiff’s own positive allegations, the plaintiff must show that the defendant’s affirmative defenses are insufficient as a matter of law. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 171-72 (Pon. 2017).

Contracts Interpretation; Debtors’ and Creditors’ Rights
If a loan is in default and the promissory note contains an acceleration clause, the lender may choose to accelerate payment of the entire amount due and payable under the note. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 172 (Pon. 2017).

Jurisdiction; Property Mortgages
The Pohnpei Supreme Court is not the only forum with jurisdiction to foreclose a mortgage on Pohnpei real estate because it is undisputed that the FSM Supreme Court may exercise such jurisdiction when the FSM Development Bank is the mortgagee since a state statute cannot divest the FSM Supreme Court of its jurisdiction. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 172 (Pon. 2017).

Property Easements
An easement that provides ingress and egress to a parcel, necessarily touches and concerns that parcel, with that parcel being the dominant estate or tenement and the parcel over which the easement runs, being the subservient estate or tenement. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 172-73 (Pon. 2017).

Property Mortgages
That the bank has also named persons in the mortgage foreclosure whose inclusion may be superfluous, does not affect the validity of the foreclosure against the registered owner as long as that person is named and all the proper steps for foreclosure are taken against that person. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 173 (Pon. 2017).

Attorney’s Fees Court-Awarded Contractual; Debtors’ and Creditors’ Rights
A bank seeking attorney’s fees as part of its loan collection lawsuit is not engaging in the unauthorized practice of law because the bank is not practicing law its duly admitted attorney is, and there is no fee-splitting involved as an attorney fee award is solely the property of the client, not the attorney. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 173 (Pon. 2017).

Contracts Interpretation; Debtors’ and Creditors’ Rights
When a promissory note contains a clause under which the bank, in the event of a default, is entitled to reasonable attorney’s fees, expenses and costs of collection, the borrowers thus agreed to the imposition of reasonable attorney’s fees and costs of collection if they defaulted on their payment obligation to the bank. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 173 (Pon. 2017).

Attorney’s Fees Court-Awarded Contractual
The FSM Development Bank can be entitled to reasonable attorney’s fees even when it uses in-house counsel. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 173 (Pon. 2017).

Attorney’s Fees Court-Awarded; Debtors’ and Creditors’ Rights
In general, in debt collection cases, reasonable attorney’s fees are limited to not more than 15% of the principal amount due. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 174 (Pon. 2017).

Civil Procedure Depositions
It is only in the rarest of instances that a party would not be subject to a deposition at another party’s request. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 174 (Pon. 2017).

Civil Procedure Depositions
When the court is not yet convinced that a party could have been deposed at much less expense if the deposition had been conducted telephonically, the court will award the costs and expenses of conducting the party’s deposition (court reporter, subpoena, transcript fees, appearance fees, etc.), but not the expenses of counsel’s travel to Honolulu. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 174 (Pon. 2017).

Contracts Third-Party Beneficiary
A third party beneficiary can recover if he or she is an intended beneficiary of a contract, but cannot enforce a contract or recover if he or she is only an incidental beneficiary and not an intended beneficiary of the contract. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 175 (Pon. 2017).

Contracts Third-Party Beneficiary
The determining factor in a third party beneficiary claim is the parties’ intent, which is a question of the contract’s construction as determined by the contract’s terms as a whole. A person is an incidental beneficiary if the benefits accruing to him or her are merely incidental to the contract’s performance. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 175 (Pon. 2017).

Contracts; Contracts Third-Party Beneficiary
Contracting parties are presumed to act for themselves. Therefore an intent to benefit a third person must be clearly expressed in the contract. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 175 (Pon. 2017).

Contracts Third-Party Beneficiary; Employer-Employee
Employment contracts generally do not make the employee’s family members or dependants intended third-party beneficiaries. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 175 (Pon. 2017).

Contracts Third-Party Beneficiary
When any benefits accruing to an employee’s family members due to the employee’s performance of his employment contract were merely incidental to that contract, the family members do not have a third-party beneficiary cause of action for breach of contract, even if the employee were to prove that his employer breached the contract. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 175 (Pon. 2017).

Employer Employee
Even if public policy did not allow at-will employment in private industry as the default position, private parties could still contract for that provision. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 176 (Pon. 2017).

Contracts Formation
The court can give no effect to a claim that a former employee did not read the contract or understand that it contained an at-will employment provision before he signed it. The general rule is that a party who signs an instrument manifests assent to it and may not later complain about not reading or not understanding it. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 176 (Pon. 2017).

Contracts Interpretation
In deciding contract cases, FSM courts generally follow common law contract principles except when a statute or constitutional provision is applicable. The court will thus apply common law contract rules, and U.S. common law decisions are an appropriate source of guidance for the FSM Supreme Court for contract issues unresolved by statutes, FSM court decisions, or custom and tradition within the FSM. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 176 n.6 (Pon. 2017).

Contracts Formation
Generally, one having the capacity to understand a written document who reads it, or, without reading it or having it read to him, signs it, is bound by his signature. Otherwise, no one could rely on a signed document if the other party could avoid the transaction by not reading or not understanding the document. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 176 (Pon. 2017).

Contracts Formation
A signatory to a contract has a duty to read, or have it read to him, or a duty to understand what he is signing. This "duty to read" even involves a person who is blind, illiterate or unfamiliar with the language in which the contract is written and who has signed a document without having anyone read it aloud or explaining it. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 176 n.7 (Pon. 2017).

Contracts Parol Evidence
The parol evidence rule bars evidence of a contemporaneous or prior oral agreement that contradicts or alters the terms of the written agreement. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 176 (Pon. 2017).

Contracts Parol Evidence
Parol evidence of a collateral agreement that does not alter or contradict the written agreement is not barred by the parol evidence rule if the collateral agreement is one that in the circumstances might naturally be omitted from the writing. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 176 (Pon. 2017).

Contracts Parol Evidence
Since an employment contract’s duration, including termination, are not matters collateral to the employment contract, evidence of a prior oral contract with terms that contradict or alter the terms of the written employment contract that the employee signed, is barred. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 176 (Pon. 2017).

Contracts Necessity of Writing
The Pohnpei statute of frauds provides that no action may be brought and maintained on any agreement that is not to be performed within one year from the making thereof unless the promise, contract, or agreement, upon which the action is brought or some memorandum or note thereof, is in writing, and is signed by the party to be charged therewith or by some person legally authorized to sign for that party. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 177 (Pon. 2017).

Contracts Necessity of Writing

An alleged oral contract for a fifty-year term, which by its terms could not be performed within one year, is not actionable under the Pohnpei statute of frauds. This is true even if the oral contract could have been terminated within one year for cause. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 177 (Pon. 2017).

Contracts Modification; Contracts Necessity of Writing
The Pohnpei statute of frauds provision bars the enforcement of oral contracts that could not be performed within one year from the making thereof. It does not bar modifying a contract more than one year after the contract’s original formation or make that modification unenforceable. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 178 (Pon. 2017).

Torts Fraud
The elements of intentional misrepresentation or fraud (essentially the same cause of action) are: 1) a knowing or deliberate misrepresentation by the defendant 2) made to induce action by the plaintiff 3) with justifiable reliance by the plaintiff upon the misrepresentations 4) to the plaintiff’s detriment. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 178 (Pon. 2017).

Torts Fraud
A plaintiff must show that the misrepresentations were done to induce action by him, and that he relied on them to his detriment. Thus, when there is no evidence that the employer, even if it made the alleged statement that it would employ him for the next 50 years (or its later employment verification statement to a bank), were statements made to induce him to borrow a large sum to build himself a house, the better view is that he (and the bank) relied on his improved financial condition and future prospects when he sought the loan. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 178 (Pon. 2017).

Equity Estoppel; Torts Fraud; Torts Negligent Misrepresentation
Intentional misrepresentation, negligent misrepresentation, and promissory estoppel all contain elements of detrimental reliance. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 178 n.11 (Pon. 2017).

Torts Negligent Misrepresentation
A negligent misrepresentation claim’s essential elements are that the plaintiff justifiably relied to his or her detriment on information prepared without reasonable care by a person who owed the relying party a duty of care. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 178-79 (Pon. 2017).

Torts Negligent Misrepresentation
For a negligent misrepresentation claim: false information must be supplied as a result of the failure to exercise reasonable care or competence in communicating the information; the person for whose benefit the information is supplied suffered the loss; and the recipient relies upon the misrepresentation. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 179 (Pon. 2017).

Torts Negligent Misrepresentation
An employer’s alleged statement in 2008 that the worker’s employment would last fifty years cannot reasonably be seen as a negligent statement inducing the employee’s action in 2010 and 2011 to borrow home construction money from a bank. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 179 (Pon. 2017).

Equity Estoppel
To claim promissory estoppel a party must prove that 1) a promise was made; 2) the promisor should reasonably have expected the promise to induce actions of a definite and substantial character; 3) the promise did in fact induce such action; and 4) the circumstances require the enforcement of the promise to avoid injustice. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 179 (Pon. 2017).

Equity Estoppel
Since no estoppel can arise from an act or a representation if it was not intended to have the effect claimed and if, from its nature or from the time when, or the circumstances under which, it was done or made, it would be unreasonable to attribute such effect to it, and since the employee cannot show that his employer’s alleged promise to him in 2008 was made with the intention that he take out a substantial home construction loan some three years later, (or some other action of a similar nature), his promissory estoppel claim must fail. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 179 (Pon. 2017).

Contracts Unconscionable
The traditional test for unconscionability is: a contract is unconscionable if it is such as no man in his senses and not under delusion would make on the one hand, and as no honest or fair man would accept, on the other. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 180 (Pon. 2017).

Contracts Unconscionable
It is generally held that the unconscionability test involves the question of whether the provision amounts to the taking of an unfair advantage by one party over the other. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 180 (Pon. 2017).

Contracts Unconscionable
To be unconscionable, the contract term must be so one-sided as to be oppressive. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 180 (Pon. 2017).

Contracts Unconscionable
The determination of unconscionability is a question of law. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 180 (Pon. 2017).

Contracts Undue Influence
There are two broad classes of undue influence cases, and a third category involving attorneys. In the first, one party uses a dominant psychological position in an unfair manner to induce the subservient party to consent to an agreement to which the other party would not have otherwise consented. In the second class, one uses a position of trust and confidence, rather than dominance, to unfairly persuade the other into a transaction. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 180 (Pon. 2017).

Contracts Undue Influence
The key to undue influence contract cases is perhaps not the means, but the results. The foremost indicator of undue influence is an unnatural transaction resulting in the enrichment of one of the parties at the expense of the other. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 180 (Pon. 2017).

Contracts Undue Influence
When there is nothing unnatural, oppressive, or grossly one-sided in the construction contract between the owner and the builder, it was not an unnatural transaction enriching one party at the other’s expense through undue influence, since the owner received a well-built house and the builder adequate compensation for its construction work. The contract did not result in the builder’s enrichment at the owner’s expense because the owner got value for money he got a well-built house. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 180 (Pon. 2017).

Contracts Modification; Debtors’ and Creditors’ Rights
A borrower cannot make a bank liable for payment for further construction work (in effect, requiring the bank to make a further loan to the borrower) without the bank’s consent. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 181 (Pon. 2017).

Contracts Breach
When an owner has clearly breached a construction contract by not paying for the change orders within a reasonable time, that breach excuses the builder’s breach of not completing the further change orders requested by the owner. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 181 (Pon. 2017).

Debtors’ and Creditors’ Rights Setoff
A setoff is a debtor’s right to reduce the amount of a debt by any sum the creditor owes the debtor, or the counterbalancing sum owed by the creditor. FSM Dev. Bank v. Gilmete, 21 FSM R. 159, 181 n.12 (Pon. 2017).

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COURT’S OPINION

LARRY WENTWORTH, Associate Justice:

On October 19, 2016, this came before the court to hear:

1) FSMDB’s Motion for Summary Judgment Against Defendants Quirino, Etwihka and Gilliard Gilmete (collectively "the Gilmetes"), filed September 18, 2015 (with the Gilmetes’ opposition filed October 12, 2015 and the bank’s reply filed October 22, 2015);

2) Motion for Partial Summary Judgment Against Quirino Gilmete, filed October 15, 2014, by APSCO,^[1] a joint venture (with Quirino’s opposition filed October 31, 2014, and supplemental opposition filed October 12, 2015; APSCO’s reply filed November 18, 2014, and its supplemental reply filed October 20, 2015; and Quirino’s surreply filed October 29, 2015);

3) Motion for Partial Summary Judgment Against Quirino Gilmete, filed December 23, 2014, by APSCO Construction Company (with Quirino’s opposition filed January 21, 2015, and APSCO’s reply filed January 23, 2015, and supplemental reply filed on October 20, 2015); and

4) Motion for Summary Judgment,^[2] filed September 28, 2015, by Quirino, Etwihka, and Gilliard Gilmete (with the bank’s opposition filed October 1, 2015, and the opposition of APSCO and APSCO Construction Co. filed October 6, 2015).

I. BACKGROUND

Quirino Gilmete ("Quirino") was employed as a heavy equipment operator, first (1986-94) at Pohnpei Transportation Authority (where he learned those skills); then he transferred to Pohnpei Public Works Department (where he was laid off as part of the early retirement program in 1997); then for APSCO at its quarry from 1998 to 2002; then the Pohnpei Port Authority (2003 under the JTPA program); then for the Etscheits, and later back at the Pohnpei Port Authority (as a security guard). He was working there in 2008 when APSCO lured him back with the offer of a much higher wage. APSCO’s quarry operation was busy due to the Pohnpei airport construction project and other projects. After the airport project was completed, APSCO had less business, not enough to make their loan payments and their payroll. On February 8, 2013, Quirino was notified that he was laid off as of February 15, 2013. Quirino has since gone back to work for the Pohnpei state government.

In 2010, Quirino’s son, Gilliard Gilmete ("Gilliard"), entered the United States Army on a four-year enlistment. His expectation at the time was that he would re-enlist for a further four-year stint. Instead, in April, 2014, he separated from the Army and moved to Honolulu to attend Heald College on the GI Bill.

On June 17, 2011, Quirino and his wife, Etwihka Gilmete ("Etwihka"), and the bank signed, and on June 23, 2011, Gilliard signed (at Camp Arifjan, Kuwait) a promissory note by which the Gilmetes borrowed $76,253 at 9% interest, to be repaid over a term of 15½ years at the rate of $773.41 a month, starting January 25, 2012. The promissory note was secured by a mortgage on Parcel No. 081-A-026 in Nankepikep, U, which was also signed on June 17, 2011, by Quirino, Etwihka, and the bank, and, on June 23, 2011, by Gilliard (at Camp Arifjan, Kuwait). All these signatures were notarized in the location where they were signed. The mortgage was then registered at the Pohnpei Court of Land Tenure and it was inscribed and endorsed on Parcel No. 081-A-026's certificate of title.

The loan’s purpose was to pay for building a home on Parcel No. 081-A-026 for Quirino and Etwihka. It was thus a construction loan and the bank had a list of contractors eligible for construction loan work. Quirino’s employer had a related entity, the APSCO Construction Company,^[3] that wanted the work but was not on the eligible list. Once APSCO Construction Co. qualified for the bank’s eligible list, Quirino contracted with it to build his house. As is usual with construction contracts, the bank made progress payments to the contractor as the project progressed. While building progressed, a number of changes were made in the in the original construction plans. The house was finished except for three changes sought by the Gilmetes shower walls and sliding glass doors in the shower, a fence on the overhang, and a safety railing on the stairs. APSCO Construction Co. has not received the final progress payment the retainage.

The last Gilmete loan repayment to the bank was on February 7, 2013. On May 14, 2013, the bank sent notice that it was accelerating the entire outstanding debt. The bank later sent notice of the default on the mortgage. The bank also registered the mortgage default at the Court of Land Tenure, where the default was endorsed and inscribed on the Parcel No. 081-A-026 certificate of title.

On February 26, 2014, the bank filed suit against the Gilmetes for breach of the promissory note contract and for foreclosure of the mortgage. On March 21, 2014, the Gilmetes answered and counterclaimed against the bank and filed a third-party complaint against "APSCO, Inc." for the breach of Quirino’s employment contract with it and for breach of the construction contract for the Gilmetes’ home. On May 20, 2014, APSCO and APSCO Construction Company answered the third-party complaint and counterclaimed against Quirino and cross-claimed against the bank for claims related to construction of the Gilmetes’ home.

II. SUMMARY JUDGMENT MOTIONS

There are, as listed above, four summary judgment motions before the court. A court, viewing the facts and inferences drawn therefrom in the light most favorable to the nonmoving party, must grant summary judgment only if the pleadings, depositions, answers to interrogatories, and admissions on file, together with any affidavits, show that there is no genuine issue about any material fact and that the moving party is entitled to a judgment as a matter of law. Jacob v. Johnny, 20 FSM R. 612, 616-17 (Pon. 2016); George v. Palsis, 19 FSM R. 558, 566 (Kos. 2014); see also Mailo v. Chuuk Health Care Plan, 20 FSM R. 18, 22 (App. 2015); Esiel v. FSM Dep’t of Fin., 19 FSM R. 590, 593 (App. 2014).

A. Bank’s Motion and the Gilmetes’ Cross-Motion on their Counterclaims

The bank moves for summary judgment against all three Gilmetes: 1) on the June 2011 promissory note for $83,376.29 in principal, penalty, and accrued loan interest (as of September 2, 2015, with interest accruing thereafter at $16.46 per day); 2) for foreclosure on the mortgage that secured the 2011 promissory note; 3) for reasonable attorney’s fees and costs of collection; and 4) on the Gilmetes’ counterclaims of negligent lending and predatory lending. The Gilmetes, in their cross-motion, move for summary judgment against the bank on their negligent lending, predatory lending, and negligent hiring counterclaims.

1. Bank’s Claim of Breach of Contract on Promissory Note

The bank seeks summary judgment on the Gilmetes’ lability under the June 2011 promissory note. Gilliard contends that the promissory note is not a valid contract that binds him because he did not sign the loan application (although his name was on it) so that there thus was no "meeting of the minds" as to him and that this makes any breach of contract claim against him void.

The court must reject Gilliard’s contention. A loan application is not a contract. At most, a loan application is an invitation by the applicant for the bank to make an offer to lend the applicant money. The bank may then decline to make an offer (deny the application) or it may make an offer (propose to lend money on certain terms), which the loan applicant may then accept (forming a contract) or reject. The three Gilmetes each accepted the bank’s offer when they agreed to the bank’s loan offer by signing the promissory note and the mortgage. Gilliard acknowledges that he signed both documents. (He concedes that he is a "co-signer" on the loan.) Gilliard is a party to the contracts.

The promissory note and the mortgage are the contracts that the bank seeks to enforce. The Gilmetes do not contest that they signed and executed the promissory note and the mortgage. They do not contend that any loan payments have been made after February 2013. They instead assert that, based on certain defenses and counterclaims, the note and the mortgage are unenforceable.

2. Gilmetes’ Counterclaims

When a party moves for summary judgment, that party must also overcome all of the adverse parties’ counterclaims in order to be entitled to summary judgment. Isamu Nakasone Store v. David, 20 FSM R. 53, 57 (Pon. 2015); see also Andrew v. Heirs of Seymour, 19 FSM R. 331, 340 (App. 2014). In their cross-motion, the Gilmetes move for summary judgment against the bank on three counterclaims: negligent lending, predatory lending, and the negligent hiring of the contractor that built their house. For the bank to prevail on its summary judgment motion, not only must the Gilmetes not prevail on their summary judgment cross-motion on their counterclaims, but the bank must also actually overcome those counterclaims.

The Gilmetes’ negligent hiring counterclaim was earlier dismissed because the facts as pled did not support a counterclaim for negligent hiring since "the contract to build the Gilmetes’ residence was between the contractor and Quirino Gilmete" and since "[t]he contractor was not hired as an employee by any party, and if anyone ‘hired’ APSCO, it was Quirino Gilmete, not the bank." Order Dismissing Three Counterclaims at 2 (Aug. 19, 2014). That is the law of the case. The Gilmetes cannot revive a previously dismissed counterclaim by moving for summary judgment on that counterclaim.

That leaves the negligent lending and predatory lending counterclaims. Neither have, as yet, been recognized as torts anywhere in the FSM. The Gilmetes ask the court to not only recognize these as actionable torts in Pohnpei but to also grant them summary judgment on these torts. The Gilmetes rely on, and quote, the introductory paragraph of the California Supreme Court’s opinion in American Financial Services Ass’n v. City of Oakland, 104 P.3d 813 (Cal. 2005) to describe these new (and apparently not yet widely recognized) torts:

"Predatory lending" is a term generally used to characterize a range of abusive and aggressive lending practices, including deception or fraud, charging excessive fees or interest rates, making loans without regard to a borrower’s ability to repay, or refinancing loans repeatedly over a short period of time to incur additional fees without any economic gain to the borrower. Predatory lending is most likely to occur in the rapidly growing "subprime" mortgage market, which is a market generally providing access to borrowers with impaired credit, limited income, or high debt relative to their income. Mortgages in this market tend to be in smaller amounts, and with faster repayments and significantly higher interest rates and fees, than "prime" mortgages.

Id. at 815. In particular, the Gilmetes rely on the clause "making loans without regard to a borrower’s ability to repay," and contend that the bank engaged in predatory lending because, in their view, the bank made a loan to them without any regard to their ability to repay it. The Gilmetes also assert that mortgages in the FSM market "tend to be in smaller amounts, and with faster repayments and significantly higher interest rates and fees, than ‘prime’ mortgages," and that is further indication of predatory lending.

The predatory lending tort is usually either created by statute or relies on an existing statute as a basis for the cause of action. Neither the State of Pohnpei nor the FSM national government^[4] has enacted a statute that could make predatory lending a cause of action. The Gilmetes also cannot prevail on their predatory lending counterclaim because, as explained below, they cannot show that the bank made the loan "without regard to a borrower’s ability to repay," and thus cannot make out a prima facie case for predatory lending.

The Gilmetes also contend that the bank was negligent in lending them money because it failed to consider their ability to repay the loan. To properly state a negligence claim, a plaintiff must show that the defendant owed the plaintiff a duty of reasonable care, that the defendant breached that duty, that damage resulted, and that that breach of duty was the proximate cause of the damage. Lebehn v. Mobil Oil Micronesia, Inc., 10 FSM R. 348, 352-53 (Pon. 2001).

Thus, if negligent lending were a cause of action, the Gilmetes would have to show that the bank owed them a duty of reasonable care to not lend them any money if the bank knew, or should have known, that there was not a reasonable likelihood that the Gilmetes could repay the loan in conformity with the loan’s repayment terms. The bank would have had to have had a duty to the Gilmetes to adequately investigate their ability to repay the sizeable sum they sought to borrow. The Gilmetes allege that the bank owed them such a duty and contend that the bank breached that duty by failing to properly investigate their ability to repay the loan.

The bank has submitted the documentary evidence (supported by affidavit) that it had used to determine whether to make the Gilmete loan. It shows that the bank obtained a verification of employment from APSCO, Quirino’s employer, showing his salary and that the probability of his continued employment was "excellent" as was the continuance of bonus payments in addition to his salary. The bank’s worksheet showed that Quirino was making $1,200 a month ($14,400 annually) and that Gilliard was making $2,580.09 a month ($30,961.08 annually). Their combined monthly income was $3,780.09 ($45,361.08 combined annual income). The bank’s worksheet also noted that Quirino’s other debt totaled only $2,863.25 annually. Since neither earner had any housing costs (Gilliard’s housing was provided by the U.S. military), it appears that the Gilmetes together should have been able to make the promissory note’s $773.41 monthly payments.

The court can only conclude that the bank showed sufficient diligence in investigating the Gilmetes’ financial condition and the Gilmetes’ ability to repay the loan they sought.^[5] Thus, if the bank had a duty to the Gilmetes to investigate their ability to pay and to not lend them money if they did not have the ability to repay, it did not breach that duty. The bank could not have known, and did not have any reason to believe, that three years later neither Quirino’s nor Gilliard’s income would be as substantial as it was when the loan was made. There is therefore no genuine issue of material fact about whether the bank made a loan to the Gilmetes without regard to the Gilmetes’ ability to pay it did not.

Since the Gilmetes cannot prevail on an essential element (loan being made without regard to the ability to repay) of the two torts (negligent lending and predatory lending) that they allege that the bank committed, those counterclaims must, as a matter of law, fail. This is because a complete failure of proof concerning one essential element of a party’s claim necessarily renders all other facts immaterial, leaving no genuine issue about any material fact. George v. Palsis, 19 FSM R. 558, 568 (Kos. 2014); Peniknos v. Nakasone, 18 FSM R. 470, 478-79 (Pon. 2012); Suldan v. Mobil Oil Micronesia, Inc., 10 FSM R. 574, 578 (Pon. 2002); Kosrae v. Worswick, 10 FSM R. 288, 291-92 (Kos. 2001). Accordingly, the court must not only deny the Gilmetes summary judgment on their counterclaims against the bank, but it must also conclude that the bank has, on its own summary judgment motion, overcome the Gilmetes’ counterclaims.

Since the Gilmetes cannot prove an essential element of their negligent lending and predatory lending counterclaims, the court does not need to, and the court will not now, decide whether either of those torts should be recognized as actionable in the FSM. That is left for another time.

3. Gilmetes’ Affirmative Defense

In addition to their counterclaims, the Gilmetes also pled an affirmative defense. Since the burden of a plaintiff moving for summary judgment extends to affirmative defenses as well as to the plaintiff’s own positive allegations, the plaintiff must show that the defendant’s affirmative defenses are insufficient as a matter of law. Andrew v. Heirs of Seymour, 19 FSM R. 331, 340 (App. 2014); Eot Municipality v. Elimo, 20 FSM R. 482, 489 (Chk. 2016); Isamu Nakasone Store, 20 FSM R. at 57.

In their defense, the Gilmetes assert that, under the promissory note, the only amounts that the bank could sue for are the monthly installment payments that were due before the bank filed its complaint on February 26, 2014. The bank responds that the promissory note that the Gilmetes signed contained a clause under which the bank could accelerate the entire amount due if the borrowers defaulted on their obligations to the bank and that the bank had exercised its right to accelerate the debt after the Gilmetes had defaulted.

If a loan is in default and the promissory note contains an acceleration clause, a lender may choose to accelerate payment of the entire amount due and payable under the note. See FSM Dev. Bank v. Arthur, 13 FSM R. 1, 10, 12 (Pon. 2004), aff’d, 14 FSM R. 390 (App. 2006); see also Bank of the FSM v. Truk Trading Co., 16 FSM R. 281, 283 (Chk. 2009); Bank of the FSM v. Asugar, 10 FSM R. 340, 342 (Chk. 2001); FSM Dev. Bank v. Mudong, 10 FSM R. 67, 74 (Pon. 2001); FSM Dev. Bank v. Gouland, 9 FSM R. 605, 606-07 (Chk. 2000). On May 14, 2013, the bank notified the Gilmetes by letter, that it would, as provided for in the promissory note, accelerate the loan repayment because the last payment on the loan had been on February 7, 2013. Accordingly, this affirmative defense fails.

4. Mortgage Liability

The bank also seeks summary judgment on its mortgage foreclosure claim. The Gilmetes, in their cross-motion, seek summary judgment that the mortgage is unenforceable for the same reasons, and based on the same counterclaims and affirmative defense by which they contended the promissory note was unenforceable. Just as those counterclaims and affirmative defense failed on the promissory note claim, they also fail on the mortgage foreclosure claim.

Additionally, the Gilmetes contend that, under Pohnpei state law, the mortgage foreclosure claim can only be litigated in the Pohnpei Supreme Court. The court must reject the Gilmetes’ contention that the Pohnpei Supreme Court is the only forum with jurisdiction to foreclose a mortgage on Pohnpei real estate. It is undisputed that the FSM Supreme Court may exercise such jurisdiction when the FSM Development Bank is the mortgagee and that a state statute cannot divest the court of its jurisdiction. Sam v. FSM Dev. Bank, 20 FSM R. 409, 416 (App. 2016); Helgenberger v. FSM Dev. Bank, 18 FSM R. 498, 500 (App. 2013); see also FSM Dev. Bank v. Estate of Edmond, 19 FSM R. 425, 432 (App. 2014).

The Gilmetes also contend that a third party gave Quirino a thousand-foot easement so that there would be ingress and egress to reach Quirino’s house but that nothing was done to make such easement to run with the land and be transferrable to the bank as, in their view, it does not necessarily touch and concern the land at issue. The Gilmetes contend that this somehow prevents mortgage foreclosure.

Apparently, Parcel No. 081-A-026 was landlocked. But on February 26, 2010, Danis Gilmete granted Quirino and his "successor and assigns" a twenty-foot wide perpetual easement over Parcel No. 081-A-024, which was then registered at the Pohnpei Court of Land Tenure and duly endorsed and inscribed on the certificate of title for that parcel. That easement, since it provides ingress and egress to Parcel No. 081-A-26, necessarily touches and concerns Parcel No. 081-A-026, with Parcel No. 081-A-26 being the dominant estate or tenement and Parcel No. 081-A-024, the subservient estate or tenement. The existence of this easement over Parcel No. 081-A-024 is thus not an impediment to the Parcel No. 081-A-026 mortgage foreclosure.

The Gilmetes further argue that the mortgaged land is owned solely by Quirino and that therefore the mortgage and its foreclosure are ineffective against Gilliard and Etwihka because no one can mortgage property that they do not own. The bank responds that Etwihka and Gilliard were both named on the foreclosure action because all three signed the mortgage; because, under the Pohnpei Code, Etwihka and Gilliard hold heirship rights to the mortgaged parcel and house; and because Etwihka is an occupant of the mortgaged parcel and the house that was built with the loan funding and her occupancy may be affected by the foreclosure.

The court must reject any claim that including Etwihka and Gilliard in the mortgage foreclosure might somehow invalidate the foreclosure proceeding or that their inclusion on the mortgage might somehow invalidate the mortgage. The Parcel No. 081-A-026 certificate of title, which lists Quirino as the sole owner, has the notice of the mortgage and the mortgage default properly endorsed and inscribed on the back of the certificate of title in order for the mortgage to be enforceable and a foreclosure to proceed against registered land. See In re Engichy, 12 FSM R. 58, 71 (Chk. 2003); In re Engichy, 11 FSM R. 520, 530 (Chk. 2003). That the bank has also named persons in the mortgage foreclosure whose inclusion may be superfluous, does not affect the validity of the foreclosure against the registered owner as long as that person is named and all the proper steps for foreclosure are taken against that person.

5. Attorney’s Fees and Costs of Collection

The bank also seeks summary judgment for its attorney’s fees and its costs of collection. The Gilmetes contend that no attorney’s fees are due because the bank is not equivalent to a legal aid agency that deals with civil rights and because the bank employed in-house counsel and was not paying its attorney on a case-by-case basis, which, in their view, means that the bank is engaged in the unauthorized practice of law and is aiding and abetting its attorney in unethical fee splitting. The Gilmetes also object to the bank’s request for costs related to its attorney’s trip to Honolulu to depose Gilliard there. This objection rests on Gilliard’s assertion that any suit against him is improper because there was no contract between him and the bank and on the Gilmetes’ assertion that the information sought at the deposition duplicated that from other past depositions and was more in keeping with the information that might be sought during an order in aid of judgment hearing, not in a pre-judgment proceeding.

As discussed above, the court rejects the Gilmetes’ contention that Gilliard is not a proper party to this lawsuit and that there was no binding contract between him and the bank. The court must also reject the Gilmetes’ unauthorized practice of law contention because the bank is not practicing law its duly admitted attorney is. And there is no fee-splitting involved as an attorney fee award is solely the property of the client, not the attorney. Sandy v. Mori, 17 FSM R. 92, 96 (Chk. 2010); Bank of the FSM v. Truk Trading Co., 16 FSM R. 467, 471 (Chk. 2009); People of Rull ex rel. Ruepong v. M/V Kyowa Violet, 15 FSM R. 53, 63 (Yap 2007).

The promissory note contains a clause under which the bank, in the event of a default, is entitled to "reasonable attorney’s fees, expenses and costs of collection." Promissory Note at 2, para. 4. The Gilmetes thus agreed to the imposition of reasonable attorney’s fees and costs of collection if they defaulted on their payment obligation to the bank. That default has occurred.

The court has previously held that the FSM Development Bank can be entitled to reasonable attorney’s fees even when it uses in-house counsel. FSM Dev. Bank v. Kaminanga, 12 FSM R. 454, 456 (Chk. 2004) (an attorney’s fees award for in-house counsel will be no different than if the party had retained outside counsel for the work). In general, in debt collection cases, reasonable attorney’s fees are limited to not more than 15% of the principal amount due. FSM Dev. Bank v. Adams, 14 FSM R. 234, 244 n.4, 256 n.8 (App. 2006); LPP Mortgage Ltd. v. Maras, 12 FSM R. 112, 113 (Chk. 2003); J.C. Tenorio Enterprises, Inc. v. Sado, 6 FSM R. 430, 432 (Pon. 1994); Bank of Hawaii v. Jack, 4 FSM R. 216, 221 (Pon. 1990).

The bank asserts that its costs of collection are also the Gilmetes’ contractual obligation and that Gilliard’s deposition was necessary and definitely not duplicative since his was the first discovery deposition conducted in the case and because his answers to interrogatories were incomplete and inaccurate. The court is satisfied that not only was Gilliard’s deposition necessary, but also that the bank was entitled to depose him since he is a party. It is only in the rarest of instances that a party would not be subject to a deposition at another party’s request. Adams, 14 FSM R. at 254. The court is satisfied that Gilliard’s deposition was necessary, especially in view of his answers to interrogatories.

The court’s only concern here is whether Gilliard could have been deposed at much less expense if the deposition had been conducted telephonically, as permitted by Civil Procedure Rule 30(b)(7). See also FSM v. Skico, Ltd. (III), 7 FSM R. 558, 559 (Chk. 1996). The bank contends that it was necessary to travel to Honolulu to take Gilliard’s deposition because he was unwilling to return to Pohnpei to have it taken there and because it was not feasible to introduce by long distance the numerous exhibits that had to be introduced during Gilliard’s deposition.

The court, however, is not yet convinced that it was not possible that a less expensive means of getting those exhibits introduced in the Honolulu deposition than travel to Honolulu. The court will therefore, at this time, award the bank the costs and expenses of conducting Gilliard’s deposition (court reporter, subpoena, transcript fees, appearance fees, etc.), but not the expenses of counsel’s travel to Honolulu.

6. Recapitulation

Accordingly, the Gilmetes’ cross-motion for summary judgment on its counterclaims is denied, and the bank is granted summary judgment. It will have judgment against the three Gilmetes, jointly and severally, for $83,376.29 as of September 2, 2015, with interest accruing thereafter at $16.46 per day, and for reasonable attorney’s fees and costs. The bank shall file and serve its attorney’s fee request within ten days of entry of this order. The bank is also entitled to, although it does not immediately seek this remedy, mortgage foreclosure on Lot 081-A-026 and the house thereon.

B. APSCO’s Motion Against Quirino Gilmete and Gilmetes’ Counterclaims

APSCO, a joint venture, moves for summary judgment on the Gilmetes’ third-party complaint against it. Specifically, APSCO moves for summary judgment on Quirino’s claims of breach of (employment) contract, lack of formation of second employment contract, intentional misrepresentation, negligent misrepresentation, and promissory estoppel and on Etwihka’s and Gilliard’s third-party beneficiary claims. Quirino moves, in the Gilmetes’ cross-motion, for summary judgment on his breach of employment contract claim against APSCO.

1. Third-Party Beneficiary Third-Party Claims

Etwihka and Gilliard allege that APSCO is liable to them because they are third-party beneficiaries of Quirino’s employment contract and that they were thus damaged when APSCO breached Quirino’s employment contract by terminating him without cause. Etwihka further asserts that Quirino’s termination deprived her of the only means she had to repay the loan.

A third party beneficiary can recover if he or she is an intended beneficiary of a contract, Johnny v. Occidental Life Ins., 19 FSM R. 350, 360 (Pon. 2014); Pohnpei Cmty. Action Agency v. Christian, 10 FSM R. 623, 633 (Pon. 2002), but cannot enforce a contract or recover if he or she is only an incidental beneficiary and not an intended beneficiary of the contract, FSM v. GMP Hawaii, Inc., 17 FSM R. 555, 591 & n.23 (Pon. 2011). The determining factor in a third party beneficiary claim is the parties’ intent, which is a question of the contract’s construction as determined by the contract’s terms as a whole. Johnny, 19 FSM R. at 360; Christian, 10 FSM R. at 633. "A person is an incidental beneficiary if the benefits accruing to him [or her] are merely incidental to the performance of the contract." United States v. Healy, 923 F. Supp. 1424, 1429 (D. Kan. 1996).

"Contracting parties are presumed to act for themselves and therefore an intent to benefit a third person must be clearly expressed in the contract." Id. Etwihka and Gilliard do not point to any provision in Quirino’s employment contract with APSCO that would make them intended, as opposed to incidental, beneficiaries of Quirino’s employment at APSCO. Employment contracts generally do not make the employee’s family members or dependants intended third-party beneficiaries. See, e.g., Armbruster v. WageWorks, Inc., 953 F. Supp. 2d 1072, 1076 (D. Ariz. 2013) (ex-husband was not third party beneficiary of ex-wife’s employment contract); Serpe v. Williams, 776 F. Supp. 2d 1285, 1288-89 (N.D. Ill. 2009) (wives were neither parties to nor intended third party beneficiaries to husbands’ employment contracts even though they also signed the contracts); Slovensky v. Birmingham News Co., 358 So. 2d 474, 477 (Ala. Civ. App. 1978) (since wife was at most incidental beneficiary of husband’s employment contract, employer not liable to wife for husband’s wrongful discharge); Anderson v. Northrup Corp., 250 Cal. Rptr. 189, 193 (Cal. Ct. App. 1988) (wife is not intended beneficiary of spouse’s employment contract). Thus, even if Quirino were to prove that APSCO breached his employment contract, Etwihka and Gilliard do not have a cause of action as intended third-party beneficiaries for that breach. Any benefits accruing to Etwihka and Gilliard due to Quirino’s performance of his employment contract with APSCO were merely incidental to that contract.

Accordingly, APSCO is granted, and Etwihka and Gilliard are denied, summary judgment on Etwihka’s and Gilliard’s third-party beneficiary claims against APSCO.

2. Quirino’s Third-Party Claims Against APSCO

APSCO seeks summary judgment on Quirino’s claims of breach of (employment) contract, lack of formation of second employment contract, intentional misrepresentation, negligent misrepresentation, and promissory estoppel. Quirino, in his cross-motion, seeks summary judgment on the same claims. As explained below, APSCO is granted, and Quirino is denied, summary judgment on these claims.

a. Quirino’s Employment Contract Claims

Quirino, in his cross-motion, seeks summary judgment that APSCO breached his employment contract by terminating him. He further seeks summary judgment for back pay at the rate of $1,000 biweekly for those pay periods he was paid either $650 or $600 biweekly.

When APSCO hired Quirino in 2008, Quirino signed a written employment contract. That contract provided that it would run from June 23, 2008 to June 23, 2050; that Quirino would be paid $5 an hour in semi-monthly installments; and that "[t]he Management shall have the right to terminate the Employee with or without cause." Employment Contract at 1 (June 28, 2008). Quirino contends that his employment contract was either originally made orally or was later orally modified so that it would last for a 50-year term, and that APSCO breached it by terminating him without cause. He variously contends that either the court should not recognize the at-will employment doctrine (that an employee can be terminated without cause) or that whether the doctrine is applicable is a matter that should be certified to the Pohnpei Supreme Court. That contention must be rejected since, even if Pohnpei public policy did not allow at-will employment in private industry as the default position, private parties could still contract for that provision. They did so here.

Quirino also contends that he would not have signed the APSCO employment contract if he had known that it contained an at-will provision. He avers that he did not read the contract or understand that it contained an at-will provision before he signed it. Aff. Quirino Gilmete paras. 13-15 (Sept. 28, 2015). Even if true, the court can give this circumstance no effect. Quirino’s argument carries no weight.

The general rule is that "a party who signs an instrument manifests assent to it and may not later complain about not reading or not understanding [it]." JOSEPH M. PERILLO, CALAMARI AND PERILLO ON CONTRACTS § 9.41, 2 (5th ed. 2003).[6] Generally, "one having the capacity to understand a writtenment who reads it, or, without reading it or having it read to him, signs it, is bound by h by his signature." Rossi v. Douglas, 100 A.2d 3, 7 (Md. 1953) (cited in CALAMARI AND PERILLO as a "typical case"). Otherwise, "no one could rely on a signed document if the other party could avoid the transaction by not reading or not understanding" the document. PERILLO, supra, § 9.41, at 393.^[7] Quirino is thus bound by his signature.

If Quirino contends that, before his employment contract was reduced to writing, they had originally agreed that his employment contract was to be for a fixed term of fifty years and could be terminated only for cause, then the parol evidence rule bars this contention. The parol evidence rule bars evidence of a contemporaneous or prior oral agreement that contradicts or alters the terms of the written agreement. Western Sales Trading Co. (Phils) v. B & J Corp., 14 FSM R. 423, 425 (Chk. 2006); see Kihara Real Estate, Inc. v. Estate of Nanpei (I), 6 FSM R. 48, 55 (Pon. 1993) (party may not seek to introduce evidence that shows that the clear and unambiguous terms of a written agreement are other than as shown on the agreement’s face). Although parol evidence of a collateral agreement that does not alter or contradict the written agreement is not barred by the parol evidence rule if the collateral agreement is one that in the circumstances might naturally be omitted from the writing, Western Sales Trading Co. (Phils), 14 FSM R. at 425, that is not the case here. The contract’s duration, including termination, are not matters collateral to this employment contract. Quirino’s argument is for oral contract terms that contradict or alter the terms of the written employment contract that he signed. Any such evidence is barred.

If, instead, Quirino contends that this at-will contract was later orally modified so that his employment was not at will but for a fixed term of fifty years, the statute of frauds would bar this contention. The Pohnpei statute of frauds provides that:

No action may be brought and maintained . . .

(5) anon any agreeagreement that is not to be performed within one year from the making thereof . .&.

unless the the promise, contract or agreement, upon which the action isght oe memorandum or n or note tote thereof, is in writing, and is signed by the party to be charged therewith, or by some person legally authorized to sign for that party.

58 Pon. C. § 1-103. Thus, Quirino’s alleged oral contract for a fifty-year term, which by its terms could not be performed within one year, is not actionable under Pohnpei law. This is true even i oral contract could have been terminated within one year fear for cause. See, e.g., LaRue v. Kaley Constr. & Dev. Co., 97 So. 3d 251, 255 (Fla. Dist. Ct. App. 2012) (statute of frauds "bars enforcement of an oral contract that was intended by the parties to last longer than a year, even though the contract could have been terminated for cause within a year"); Collins v. Allied Pharmacy Mgmt., Inc., 871 S.W.2d 929, 934 (Tex. App. 1999) ("termination for cause does not take [employment] contract outside the statute of frauds"); Graham v. Central Fid. Bank, 428 S.E.2d 916, 917-18 (Va. 1993) (an employment contract terminable only for cause is one for a fixed term and subject to the statute of frauds).

In 2009, Quirino’s pay was changed from an hourly rate of $5 per hour, paid semi-monthly based on the hours he had worked (as per the written contract) to a flat rate of $650 semi-monthly regardless of the hours he worked, or whether he worked at all. Later the $650 semi-monthly remuneration was changed to $600 biweekly because Quirino had asked that he be paid biweekly instead of semi-monthly.

Quirino now argues that he could not have agreed to this because no one in their right mind would agree to reduce their salary. However, the evidence does not support this position. When Quirino was paid $5 per hour semi-monthly (which if paid biweekly, would have only equaled $400 before any overtime), his pay ranged between $560 (highest) and $356.25 (lowest). Aff. Takuro Akinaga & Ex. A (Quirino’s verified payroll records) (Nov. 18, 2014). So the $650 semi-monthly was not a pay reduction but rather an increase. The switch from $650 semi-monthly to $600 biweekly was also not a pay reduction. Instead it was a different allocation of the same pay because $650 semi-monthly times 24 pay periods per year equals $15,600 and $600 biweekly times 26 pay periods per year equals $15,600.^[8]

Quirino nevertheless argues that, since the switch from $5 per hour to a $650 semi-monthly (and then to $600 biweekly) was made more than one year after contract was executed,^[9] those modifications, which were done by oral agreement, were barred by the Pohnpei statute of frauds. Quirino characterizes as a cause of action that there was a second contract formed that reduced his pay from $1,000 per pay period.^1[0] Quirino misunderstands the statute of frauds provision he cites. Subsection 1-103(5) bars the enforcement of oral contracts that could not "be performed within one year from the making thereof." 58 Pon. C. § 1-103(5). It does not bar modifying a contract more than one year after the contract’s original formation or make that modification unenforceable.

Accordingly, APSCO is gr, and Quirino is denied, summary judgment on Quirino’8217;s employment contract claims.

b. Intentional and Negligent Misrepresentation Third-Party Claims

As claims related to his employment contract claims, Quirino, in his cross-motion, seeks summary judgment on his intentional and negligent misrepresentation claims. Quirino bases these claims on his contention that he was told that his employment was for a fixed term of fifty years, and that, in reliance on this assurance, he took out a home construction loan that he either would not have taken out or that was much larger that he otherwise might have contemplated. APSCO also seeks summary judgment on these claims in its favor.

The elements of intentional misrepresentation or fraud (essentially the same cause of action) are: 1) a knowing or deliberate misrepresentation by the defendant 2) made to induce action by the plaintiff 3) with justifiable reliance by the plaintiff upon the misrepresentations 4) to the plaintiff’s detriment. Sorech v. FSM Dev. Bank, 18 FSM R. 151, 158 (Pon. 2012); FSM v. GMP Hawaii, Inc., 17 FSM R. 555, 584-85 (Pon. 2011); Arthur v. Pohnpei, 16 FSM R. 581, 597 (Pon. 2009); Individual Assurance Co. v. Iriarte, 16 FSM R. 423, 442 (Pon. 2009); Mid-Pacific Constr. Co. v. Semes, 7 FSM R. 522, 526 (Pon. 1996); Chen Ho Fu v. Salvador, 7 FSM R. 306, 309 (Pon. 1995); Pohnpei v. Kailis, 6 FSM R. 460, 462 (Pon. 1994).

There is no evidence that, even if APSCO made the alleged statement that it would employ Quirino for the next 50 years, that APSCO made the statement to induce Quirino to borrow a large sum to build himself a house. The only other statement that Quirino refers to is APSCO’s statement in 2010 to the bank on the bank’s employment verification form, that Quirino’s probability of continued employment was "excellent." That statement was made to the bank, not to Quirino, after Quirino had already taken the action of applying for a loan and so could not have been made to induce Quirino to borrow money. "[A] plaintiff must show that the misrepresentations were done to induce action by him, and that he relied on them to his detriment." Arthur, 16 FSM R. at 597 (citing Semes, 7 FSM R. at 526). Quirino has not done so. Neither the statement allegedly made when APSCO hired him (that he had a job for 50 years) nor APSCO’s later employment verification statement were statements made to Quirino to induce Quirino to borrow large sums to build a home. The better view is that Quirino (and the bank) relied on his improved financial condition and future prospects when he sought the loan.

A negligent misrepresentation claim’s^1[1] essential elements are that plaintiffs justifiably relied to their detriment on information prepared without reasonable care by a person who owed the relying party a duty of care. Occidental Life Ins. Co. v. Johnny, 20 FSM R. 420, 430 (App. 2016) (contains the elements of reasonable reliance and damages). In other words, for a negligent misrepresentation claim: false information must be supplied as a result of the failure to exercise reasonable care or competence in communicating the information; the person for whose benefit the information is supplied suffered the loss; and the recipient relies upon the misrepresentation. Id. Quirino has neither alleged nor shown that APSCO had a duty of care toward him to convey information to him or that false information was conveyed as a result of a failure to exercise that care. And, as above, APSCO’s alleged statement in 2008 that Quirino’s employment would last fifty years cannot reasonably be seen as a negligent statement inducing Quirino’s action in 2010 and 2011 to borrow home construction money from the bank.

Accordingly, APSCO is granted, and Quirino is denied, summary judgment on Quirino’s intentional misrepresentation and negligent misrepresentation claims.

c. Quirino’s Promissory Estoppel Claim

APSCO and Quirino both seek summary judgment on Quirino’s promissory estoppel claim. This claim has similarities to Quirino’s misrepresentation claims. See note 11. "[T]o claim promissory estoppel a party must prove that 1) a promise was made; 2) the promisor should reasonably have expected the promise to induce actions of a definite and substantial character; 3) the promise did in fact induce such action; and 4) the circumstances require the enforcement of the promise to avoid injustice." Chuuk v. Actouka Executive Ins. Underwriters, 18 FSM R. 111, 120 (App. 2011) (citing AHPW, Inc. v. Pohnpei, 14 FSM R. 188, 191-92 (Pon. 2006)).

Even assuming that APSCO made a promise of fifty-years’ continued employment to Quirino, APSCO could not have reasonably expected that that promise would, three years later, induce Quirino to take out a substantial home construction loan. Nor would it be an action APSCO would necessarily seek. Thus, the court should resolve this claim in the same manner as Quirino’s misrepresentation claims. Since "no estoppel can arise from an act or a representation if it was not intended to have the effect claimed and if, from its nature or from the time when, or the circumstances under which, it was done or made, it would be unreasonable to attribute such effect to it," Carlos Etscheit Soap Co. v. Epina, 8 FSM R. 155, 164 (Pon. 1997), and since Quirino cannot show that APSCO’s alleged promise to him in 2008 were made with the intention that Quirino take out a substantial home construction loan some three years later or some other action of a similar nature, Quirino’s promissory estoppel claim must also fail.

Accordingly, APSCO is granted, and Quirino is denied, summary judgment on Quirino’s promissory estoppel claim.

C. APSCO Construction Co. and the Gilmetes’ House

APSCO Construction Co. moves for summary judgment on the Gilmetes’ breach of construction contract and unconscionable contract (undue influence) claims. It also seeks summary judgment on its claim for the retainage withheld on the project and for two change orders that it completed but was not paid for. The Gilmetes, in their cross-motion, ask for summary judgment on the house construction contract claims and seek relief in the form of specific performance and damages.

The Gilmetes’ third-party complaint alleges two causes of action against APSCO Construction Co. breach of the construction contract and unconscionable construction contract as the result of undue influence in obtaining the construction contract. They allege that APSCO Construction Co. breached the construction contract by not installing shower walls and sliding glass doors in the shower, a fence on the overhang, and a safety railing on the stairs.

1. Unconscionability

Quirino contends that the contract is unconscionable because APSCO Construction Co. exercised undue influence over the construction contract’s formation. "The traditional test [for unconscionability] is this: a contract is unconscionable if it is ‘such as no man in his senses and not under delusion would make on the one hand, and as no honest or fair man would accept, on the other.’" Tulowitzki v. Atlantic Richfield Corp., 396 A.2d 956, 960 (Del. 1978) (quoting Williams v. Walker-Thomas Furniture Co., [1965] USCADC 396; 350 F.2d 445, 450 n.12[1965] USCADC 396; , 18 A.L.R.3d 1297, 1303 n.12 (D.C. Cir. 1965)). "It is generally held that the unconscionability test involves the question of whether the provision amounts to the taking of an unfair advantage by one party over the other." Tulowitzki, 396 at 960. To be unconscionable, the contract term must be "so one-sided as to be oppressive." W.L. May Co. v. Philco-Ford Corp., 543 P.2d 283, 287 (Or. 1975). "[T]he determination of unconscionability is a question of law." McNally Wellman Co. v. New York Elec. & Gas Corp., [1995] USCA2 929; 63 F.3d 1188, 1198 (2d Cir 1995).

Quirino does not direct the court’s attention to any particular clause or provision that he claims is unconscionable, grossly one-sided, or oppressive. APSCO Construction argues that the construction contract was not unconscionable because it was not arrived at (and Quirino does not allege that it was arrived at) through duress or coercion. Instead, Quirino contends that the contract was unconscionable because it was the result of undue influence.

There are two broad classes of undue influence cases, and a third category involving attorneys. In the first, one party uses a dominant psychological position in an unfair manner to induce the subservient party to consent to an agreement to which the other party would not have otherwise consented. The doctrine requires neither threats nor deception although often enough one or the other is present. In the second class, one uses a position of trust and confidence, rather than dominance, to unfairly persuade the other into a transaction. Very often the line between these two categories is blurred, as when the dominant party dominates by virtue of the trust and confidence, rather than the subservience, engendered.

PERILLO, supra, § 9at 330 (footnotes omitted)tted). "[T]he key is perhaps not the means, but the results. The foremost indicator of undue influence is an unnatural transaction ring in the enrichment of one of the parties at the expense ense of the other." Id. at 331 (footnote omitted).

There does not appear to be anything unnatural, oppressive, or grossly one-sided in the construction contract between Quirino and APSCO Construction. Quirino acknowledges that he received a well-built (except for some minor uncompleted changes on which he bases his breach of contract claim) house and APSCO Construction received (except for some change order payments and retainage it claims not to have received) adequate compensation for its construction work. It was not an unnatural transaction enriching one party at the expense of the other. Quirino was enriched by a well-built house, and APSCO Construction was enriched by money payments to its account. While APSCO Construction may have ben able to use its position as an entity related to Quirino’s employer to influence Quirino to use it as the contractor on the project instead of another contractor, that did not result in the enrichment of APSCO Construction at Quirino’s expense. Quirino got value for money. He got a well-built house.

Accordingly, the court concludes that as a matter of law, the construction contract between Quirino and APSCO Construction was not unconscionable and therefore grants APSCO Construction summary judgment on Quirino’s unconscionable contract claim, and Quirino summary judgment on this claim.

2. House Construction Contract Claims

Quirino contends that APSCO Construction breached the construction contract because it did not complete the job because it did not instal shower walls and sliding glass doors in the shower, a fence on the overhang (or terrace), and a safety railing on the stairs. Quirino seeks summary judgment and specific performance for these items as well as damages. APSCO Construction admits that those items have not been completed but contends that since those are the result of change orders not in the original construction plans its failure to complete them is not a breach. APSCO Construction asserts it is (or was) willing (for a price) to finish these items once Quirino has paid for previous change orders that he requested (a modification to the concrete footings for $1,453.16; modification to the roof, $2,502.93; and a terrace added to the house, $9,813.93, for a total of $13,770.02.). Quirino contends that he is not liable for those costs. He asserts that all payments, including those for change orders were supposed to be funded by the Development Bank. Although the project engineer and the bank signed, Quirino refused to sign the Certification of Final Completion for the project. He will not sign because of the three uncompleted change order items. Since that certificate has not been signed, the bank has not paid APSCO Construction the last $7,625.30 of the contract price the retainage.

APSCO Construction seeks summary judgment on Quirino’s breach of contract claim that it has not breached the construction contract. It also seeks summary judgment for the change orders that it completed, and it further seeks summary judgment that it has completed the contract and must be paid the retainage. APSCO Construction concedes that there may be a genuine dispute about whether the safety railings should have been included on the stairs, although it argues that they were not required by the building code, and is therefore willing that $1,000 (its estimated price for the railings) of the retainage be withheld until those railings are installed.

The construction contract provides that: "The Owner [Quirino] reserves the right to order changes to the Project without invalidating this contract. . . . . the Owner sgreemako adjusadjustments to the contract price and time of completion as is reasonable and appropriate. All changes shall be in writing and signed by the par" Co ContAgreement Between Owner and Contractor ctor para.para. 18 ( 18 (Aug. 15, 2011). Quirino does not dispute that the change orders were made in accordance with the construction contract. The contract clearly makes Quirino liable for an adjustment to the contract price for the change orders.

Quirino cannot make the bank liable for payment for further construction work (in effect, requiring the bank to make a further loan to Quirino) without the bank’s consent. Cf. Bank of the FSM v. Hebel, 10 FSM R. 279, 286 (Pon. 2001) (divorcing couple is free to enter into whatever agreement they choose as to who between the two of them will be responsible to repay a bank loan, but without the bank’s consent such an agreement can have no effect on bank’s right to seek repayment of the loan from either or both of them). Accordingly, Quirino has clearly breached the contract by not paying for the change orders within a reasonable time. Quirino’s breach excuses APSCO Construction’s breach of not completing the further change orders (shower glass doors and terrace fencing) requested by Quirino. Therefore, Quirino is liable for the price adjustment amounts of the completed change orders $13,770.02. From this sum will be deducted as a setoff,^1[2] $1,145, an amount that APSCO Construction agreed that it owed Quirino for usage of electricity from March 9, 2012 through October 24, 2012. Minutes of Meeting Between Contractor and Owner para. 5 (Nov. 26, 2012). APSCO Construction is thus entitled to summary judgment against Quirino for $12,625.02.

Since APSCO Construction concedes there may be a genuine dispute about the stair railings, the court will consider the project complete and the retainage payable to APSCO Construction once those railings have been installed.

Accordingly, Quirino is denied summary judgment on his construction contract claims, and APSCO Construction is granted summary judgment to extent: Quirino is liable to it for $12,625.02 and that APSCO Construction is entitled to certificate of final completion and the $7,625.30 retainage once safety railings have been installed on the stairs at the Gilmete residence.

III. CONCLUSION

Accordingly, the bank is granted summary judgment against the three Gilmetes, jointly and severally, for $83,376.29 as of September 2, 2015, with interest accruing thereafter at $16.46 per day, and for reasonable attorney’s fees and costs, and APSCO Construction is granted summary judgment against Quirino Gilmete for $12,625.02 and APSCO Construction is further entitled to the $7,625.30 retainage once safety railings have been installed on the stairs at the Gilmete residence. APSCO is granted and Quirino Gilmete is denied summary judgment on all claims related to his employment contract.

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^[1] This entity, although often referred to as APSCO, Inc. is not a corporation. It is a joint venture of two corporations, A&P Rock Products, Inc. and Saito Gumi, Ltd.

^[2] This motion was filed partially as a cross-motion to the bank’s summary judgment motion and partially as cross-motions to the two summary judgment motions filed by the two APSCO entities.

^[3] APSCO Construction Company, not to be confused with APSCO, see supra note 1, is a partnership between Takuro Akinaga and Shiro Akinaga.

^[4] While tort law, especially a common law tort like negligence, is primarily a state responsibility, the national government may create tort law when legislating in an area that the Constitution has expressly delegated to Congress the power to legislate. Pohnpei v. AHPW, Inc., 14 FSM R. 1, 16 (App. 2006). The regulation of banking and of commercial paper are powers expressly delegated to the national government. FSM Const. art. IX, § 2(g). "Commerpaper" is anys any "instrument, other than cash, for the payment of money" and is "generally viewed as synonymous with negotiable paper or bills and notes [and] sometimes applied even to nonnegotiable instruments." BLACK’S LAW DICTIONARY 1220 (9th ed. 2009) (emphasis in original). Promissory notes are commercial paper.

^[5] By the bank’s calculation, the Gilmetes’ debt to income ratio was 42%, which was below the bank’s 50% debt to income guideline. The bank states that it does not lend money to an applicant whose debt to income ratio is 50% or higher. The Gilmetes do not contend that 42% is an unreasonably high debt to income ratio.

^[6] Since, in deciding contract cases, FSM courts generally follow common law contract principles except when a statute or constitutional provision is applicable, the court will apply common law contract rules, and United States common law decisions are an appropriate source of guidance for the FSM Supreme Court for contract issues unresolved by statutes, FSM court decisions, or custom and tradition within the FSM. Pacific Skylite Hotel v. Penta Ocean, 19 FSM R. 265, 275 (Pon. 2014).

^[7] A signatory to a contract has a duty to read, or have it read to him, or a duty to understand what he is signing. This "duty to read" even "involves a person who is blind, illiterate or unfamiliar with the language in which the contract is written and who has signed a document without having anyone read it aloud or explaining it." JOSEPH M. PERILLO, CALAMARI AND PERILLO ON CONTRACTS § 9.42, at 5th ed. 2003) ("ex ("except possibly in the case of an emergency, the party must employ self-protection by procuring someone to read aloud, explain, or translat [contract]"); cf. Melander v. Kosrae, 3 FSM R. 324, 324, 329 (Kos. S. Ct. Tr. 1988) (relief will be denied when the aggrieved party’s misunderstanding was caused by his unexplained failure to read the necessary documents).

^[8] Actually, the biweekly pay was a very slight increase because there is, for biweekly payrolls, one or two extra days each year, which accumulate until there is a year in which 27 paydays will occur.

^[9] This is a dubious assertion as APSCO has provided payroll records showing that the switch to $650 semi-monthly flat rate was in March 2009, about nine months later, and the switch to $600 biweekly flat rate was July 1, 2009, barely a year later.

^1[0] This would have required about 80 hours of overtime at time and a half of $7.50 an hour in addition to 80 hours at $5 an hour every pay period to achieve a $1,000 paycheck. No documentary evidence has been provided to rebut APSCO’s verified payroll records that Quirino never earned more than $560 when paid at the $5 per hour rate.

^[1]1 In Quirino’s filings he has referred to this claim as detrimental reliance although in the third-party complaint it is denominated as negligent misrepresentation. Intentional misrepresentation, negligent misrepresentation, and promissory estoppel all contain elements of detrimental reliance.

^1[2] A setoff is a debtor’s right to reduce the amount of a debt by any sum the creditor owes the debtor, or the counterbalancing sum owed by the creditor. Phillip v. Marianas Ins. Co., 12 FSM R. 464, 469 (Pon. 2004).